Oil pared its weekly gains on Friday but both Brent and WTI remain on track to close above $100 a barrel for the first time since mid-May, as escalating attacks along Middle East shipping routes stoke fears of a prolonged supply disruption. The Friday pullback followed reports that regional ministers are negotiating a temporary shipping deal with Iran, while OPEC cut its 2026 demand growth forecast in a fifth straight downward revision.
Brent crude fell $2.01, or 1.9%, to $105.62 a barrel by 0555 GMT on Friday. West Texas Intermediate dropped $1.38, or 1.4%, to $101.10 a barrel in the same session, as both benchmarks pared early gains. Even after the retreat, oil is still trading nearly 13% higher on the week — the steepest weekly gain since the week ended July 17.
The retreat followed a Financial Times report that Middle East foreign ministers are negotiating a temporary deal with Iran to manage shipping through the Strait of Hormuz. Overnight, Brent held near $108 a barrel, adding renewed inflation pressure and feeding through into global rate markets, before the diplomatic contacts triggered Friday's slide.
Houthi advance widens shipping risk
Iran-aligned Houthi rebels seized control of Yemen's port of Mocha on Thursday, posing a further threat to Red Sea traffic, while Gulf shipping remains restricted through the Strait of Hormuz as tanker attacks have intensified in recent days. Iran said it attacked 10 ships near the strait on Wednesday, after the U.S. hit five Iranian oil tankers, and Iran's Islamic Revolutionary Guard Corps said it would escalate its response to any further attacks. Analysts say the attacks on Saudi energy facilities mark an escalation beyond Iran and the Strait of Hormuz, raising fears of prolonged disruption across the broader region.
Diesel hits a record as OPEC cuts its demand outlook
Supply disruptions from the U.S.-Iran war, combined with Ukrainian attacks on Russian refineries, pushed the U.S. national average diesel price past $6 a gallon for the first time ever on Thursday, according to price tracker GasBuddy. OPEC lowered its 2026 global oil demand growth forecast to 380,000 barrels per day, the fifth straight downward revision. Separately, OPEC output fell by 640,000 barrels per day in August, a Reuters survey found.
Rally's durability hinges on China demand
Analysts said the rally's durability will hinge on China, the world's largest crude importer — if China continues buying, it could amplify the impact of supply disruptions and drive prices higher. President Donald Trump has shown no sign of easing attacks on Iran, warning Washington may hit Iran's Pickaxe Mountain site near its damaged Natanz enrichment facility, though he said he thought the war would end immediately after the November midterm elections. IG analyst Tony Sycamore said it is becoming increasingly likely that WTI crude will retest its $119.48 high from early March if the conflict keeps widening.
Sources: Investing.com, ActionForex
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